The Seven Cruel Truths About IT Costs

The seven harsh truths were earlier published in an article by Harvard Business Review, that speaks about the facts associated with out-of-control IT costs.

The article was authored by former CIO, Susan Cramm who is the founder and president of Valuedance, an executive coaching firm in San Clemente. In this article Cramm reflects that companies overspend on IT because they are unwilling to say no to frontline managers.”

Enhancements often don’t deliver results commensurate with their costs. Establish a fixed budget for IT enhancements for each function or division, in line with the goals they are expected to achieve. Do not extend funds. When they run out, they run out.

Projects are often too big and take too long, partly because unnecessary functionality is built into applications. Require leaders to commit to delivering measurable value for application functions before granting them project approval and before allowing them to maintain funding at each stage. Tie executive compensation to realization of value.

Previously purchased applications and infrastructure technology are often underutilized. Use what you have before investing in new technology. Require IT to counterbalance the added cost of new infrastructure investments with sensible reductions in the cost of maintaining the basics.

Project failure rates are too high. Minimize the duration of project stages. (Limiting scope makes projects less risky and more likely to succeed. That, in turn, increases buy-in for subsequent stages.). Establish “kill switch” rules for projects (for example, “Kill project if initial budget has been modified twice and beta deployment still has not occurred”).

Tech teams do not have sufficient incentive to achieve high quality, and quality is often not measured. Make sure development and applications support teams are accountable for the operational costs associated with defects, including emergency change requests and help desk calls.

Managers don’t know enough about the systems that support their areas. Follow Intuit’s lead and charge units for “helpless” help desk calls.

IT is too risk averse: “No one ever got fired for buying IBM or Microsoft.”. Require IT to examine the costs and benefits of extending refresh cycles, delaying upgrades, discontinuing maintenance agreements, and using open source platforms and applications.

While Susan Cramm brings out some harsh reality, some of the points discussed are unrealistic. The point four speaks about “kill switch” rule, we wonder how many projects will see the light if projects are “executed” with this approach . Point five is very true in systems where often tech teams hold lesser responsibility on the execution of a project.

The truths are precise, but we would like to see a much tolerable advice, to be more practical.